Financial Accounting Report: Linda's Business Transaction Analysis

This report presents a comprehensive analysis of Linda's business transactions, employing fundamental accounting principles to assess her financial performance. The analysis begins with detailed journal entries, meticulously recording each transaction in a tabular format. These entries are then classified and summarized in ledger accounts, providing a clear overview of each account's activity. A trial balance is constructed to verify the accuracy of the ledger, serving as the foundation for preparing the financial statements. The report includes an income statement, evaluating Linda's profitability, and a balance sheet, presenting her assets, liabilities, and equity. Furthermore, the report addresses the impact of drawings on capital. Part B of the report delves into ratio analysis, comparing Linda's financial performance against industry benchmarks. It calculates and interprets key ratios, including net profit ratio, gross profit ratio, current ratio, quick ratio, accounts receivable collection period, and accounts payable ratio. The analysis highlights Linda's strengths and weaknesses, offering insights into her financial management and providing recommendations for improvement.

Recording Business Transaction

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
A) Journal entries.........................................................................................................................3
B) Ledger.....................................................................................................................................6
C) Trial balance..........................................................................................................................10
D) Income statement..................................................................................................................10
E) Balance sheet.........................................................................................................................11
F) Special note regarding drawing account...............................................................................12
PART B..........................................................................................................................................13
Calculation of ratio....................................................................................................................13
Evaluation of financial performance of Linda's organization....................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
Recording business transaction is procedure in which accountant, analysis, collect, and
record each business activity in tabular format to show their monetary value. This report has
been formulated to define the relevance of accoutring approach, by solving Linda's case study. In
includes, how business operations record in the form of journal and then they classified in ledger
account, on the basis of that to find out error trial balance has been format, and it proved base to
prepare financial statement. In this report to compare performance of Linda's organization with
industry different types of ratios used to measure the performance.
PART A
A) Journal entries.
Date Particulars L.F
Debit
Amount
Credit
Amount
2020
01/10/2
0 Bank A/c.... Dr 8000...
Cash A/c ... Dr 5200..
Van A/c Dr 3000..
To Capital A/c.. 16200..
(Being business started)..
02/10/2
0 Laptop A/c Dr 1000..
To Bank A/c.. 1000..
(Being laptop purchased)..

04/10/2
0 Purchase A/c Dr. 2450...
To Toy Ltd.. 2450..
(Being purchase made)..
05/10/2
0 Bank A/c Dr 1500..
To Sales A/c.. 1500..
(Being sales made..)
12/10/2
0 Repairs A/c Dr 80..
To Cash A/c.. 80..
(Being cash paid for
repairs)..
18/10/2
0 Toy Ltd A/c Dr 100..
To Purchase Return 100..

A/c..
(Being purchase return
made)..
21/10/2
0 Bank A/c Dr.. 500..
To Rent A/c.... 500..
(Being rent received)..
23/10/2
0 Cash A/c Dr.. 1500..
Fred A/c. Dr.. 400..
To Sales A/c .. 1900..
(Being sales made)..
23/10/2
0 Cash A/c Dr.. 500..
To Sales A/c .. 500..
(Being sales made)..
24/10/2
0 Car A/c Dr.. 2500....
To Bank A/c.. 2500....

(Being car purchased)
26/10/2
0 Wages A/...c Dr.. 820....
To Bank A/c..... 820....
Date Particulars L.F
Debit
Amount
Credit
Amount
2020
01/10/2
0 Bank A/c Dr 8000....
Cash A/c. Dr 5200...
Van A/c Dr 3000....
To Capital A/c.. 16200....
(Being business started)
02/10/2
0 Laptop A/c. Dr 1000....
To Bank A/c. 1000....
(Being laptop purchased)..
04/10/2
0 Purchase A/c. Dr 2450....
To Toy Ltd.. 2450..

(Being purchase made)
05/10/2
0 Bank A/c ... Dr 1500..
To Sales A/c.. 1500..
(Being sales made)
12/10/2
0 Repairs A/c …. Dr 80...
To Cash A/c.... 80...
(Being cash paid for
repairs)......
B) Ledger
1. Bank account
Date Particular J.F Amount Date Particular J.F Amount
…...To capital.... 8000...
…...To sales... 1500.. …....By laptop.... 1000....
…...To
rent. ..received.. 500.... …...By Car.... 2500...
…...By wages.... 820....
…...By Rent.. 1000..
…...By drawing.. 1600..
….By balance c/d 3080..

Total 10000 Total ... 10000..
2)Rent received account
Date Particular J.F Amount Date Particular J.F Amount
…...By
bank. 500..
500.. 500..
3) Cash account
Date Particular J.F Amount Date Particular J.F Amount
…...To capital.. 5200.. …...By repair 80..
…...To sales.. 1500..
…...By balance
c/d.... 7120.
To sales.. 500..
7200 7200
4) Fred a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To sales.. 400
…...By balance
b/d 400
5) Purchase a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To Toys
limited.. 2450
…...By balance
c/d 2450
6) Toys limited a/c

Date Particular J.F Amount Date Particular J.F Amount
…...To purchase
return.. 100
…...By
purchase.. 2450
…...To balance
b/d.. 2350
2450 2450
7) Rent a/c
Date Particular J.F Amount Date Particular J.F Amount
..…...To Bank 1000
…...By
balance b/d. 1000
8) Van a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To.
capital.. 3000
…...By balance
b/d.. 3000....
9) Capital a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To balance
b/d 16200.. …...By bank.. 8000..
…...By cash. 5200..
…...By van.. 3000..

10) Sales a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To balance
b/d 3900.. …...By bank. 1500
…...By cash... 1500
…...By Fred 400
…...By cash 500
11) Laptop a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To bank 1000
…...By balance
b/d 1000
12) Car a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
Bank 2500
…...By balance
b/d 2500
13) Drawing a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
Bank 1600..
…...By balance
b/d 1600.
14) Wages a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
Bank 820..
…...By balance
b/d 820..

15) Repair a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
cash 80..
…...By balance
b/d.. 80..
C) Trial balance
Accounts Debit Credit
Bank 3080
Cash 7120
Van 3000
Laptop 1000
Toys limited 2350
Purchase 2450
Purchase return 100..
Sales 3900..
Rent received 500..
Rent paid 1000
Wages 820.
Drawing 1600..
Capital 16200..
Repairing
account 80..
Fred account 400..
Car account 2500..